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What President Obama's Budget Means for Poor People

If a budget is a moral document, what should be said about the president's proposed budget for 2010? I focus here on what this budget proposal says about justice for poorer Americans.

A little history is essential. The U.S. economy has grown enormously since the end of World War II. But there is a huge difference in how that growing wealth was distributed in the period from 1945-1980 and from 1981 to the present. In the first period, increasing wealth was widely shared and inequality dropped. In more recent decades, the economy continued to grow but most of the benefits went to the richest 20 percent.

In 1980, the richest 1 percent of Americans received 10 percent of all U.S. income. By 2006, that number had jumped to 22.1 percent.

What happened to the rest of us? From 1979-2005, the bottom 20 percent experienced a miniscule growth of pre-tax (inflation-adjusted) income of just 1 percent over all those 26 years. For the second-lowest 20 percent, income grew only 10 percent; for the middle 20 percent, it grew only 15 percent. Even those in the next-to-the-top 20 percent only received 23 percent more income after 26 years. But the top 20 percent saw their income jump 75 percent. And the richest 1 percent received a whopping 201 percent increase.

What President Obama's new budget seeks to do is to reverse this historic trend and provide more income and opportunity for the people at the bottom. Here are some key ways:

Making work work. The Earned Income Tax Credit (EITC) is increased, and families with three or more children receive a significantly larger tax credit. (Since the EITC is refundable, people receive this money even if they owe no federal income taxes.) The budget also seeks to raise the minimum wage.

Improvement in the Child Tax Credit (CTC). Previously, this $1,000-per-child tax credit was not refundable for people earning less than $10,000 a year. That meant the poorest workers got nothing. Now the CTC will be available to people earning as little as $3,000 (both this change and the increased EITC make permanent what the stimulus bill had done temporarily).

More assistance for college students from poorer families. This budget increases the dollar amount of annual Pell Grants (outright grants for low-income college students) and then indexes them to inflation for an extra $120 billion over 10 years. In addition, there is a new Access and Completion Incentive Fund ($2.5 billion over five years) to help low-income college students complete their degrees. The budget also seeks to save $54 billion in the student loan program by removing banks as the middlemen.

No farm subsidies for large farms, but more money for child nutrition. Large farms making more than $500,000 will no longer receive farm subsidies ($15 billion in savings). But there is an extra $10 billion for child nutrition. The highly successful nutrition program called Women, Infants, and Children (WIC) is also slated for expanded funding. In addition, there is an additional $1 billion a year for the upcoming Child Nutrition reauthorization.

Pre-college education. The budget doubles the funding for charter schools and creates an "innovation fund" to encourage better schools. There is also $4.2 billion in new spending for child care, Early Head Start, and Head Start.

Expanded health coverage. The budget sets aside $634 billion over 10 years to help move us toward the goal of universal health coverage.

There are many other good things about this budget. It is far more transparent than President Bush's budgets because it seeks to include all known costs (e.g., the cost of the wars in Iraq and Afghanistan). And it calls for a major program to reduce carbon emissions and thus help decrease the impact of global warming.

Of course there are also things to question. Most of the increased taxes on those with incomes over $250,000 are quite justified, but reducing the tax deduction for charitable contributions is probably misguided. And the amount for economic foreign aid for poor nations should be higher. The size of the deficit is also of major concern. A large part of the present federal debt is because of President Bush's invasion of Iraq and his tax cuts for the rich. But that does not mean we can continue indefinitely with high federal deficits. Large deficits during a bad recession are wise. Ongoing deficits mean putting current purchases on our grandchildren's credit cards.

The bottom line is that this budget represents a historic change. Jim Wallis told several of us in a recent call that he and others participated in a conference call with key government leaders around the time the new budget was released. The Obama folks wanted to show how their new budget would benefit low-income Americans. Jim said the call left him in tears as he realized, first, that he had never experienced this kind of concern from top government officials before and, second, that the budget contained things that "some of us have gotten arrested for."

The battle, however, has just begun. Many voices in Congress will seek to cut spending for the poor. We must let our representatives know that we strongly support effective measures to empower poor Americans.

Ron Sider is president of Evangelicals for Social Action, a professor and director of the Sider Center on Ministry and Public Policy at Eastern Baptist Theological Seminary, and a member of the Red Letter Christians. This article appears in the forthcoming May-June/09 issue of PRISM magazine.

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